Research in the Unit of Neural Network Physiology is primarily concerned with the cortex-basal ganglia system, which is important for movement control, reward mediated behavior, and higher cognitive functions. Basal ganglia dysfunctions, e.g. those that arise from a dopamine imbalance in the striatum, are correlated with severe movement disorders, e.g. Parkinson's disease and cognitive disorders e.g. Schizophrenia. Despite their involvement in a variety of different functions, the functional architecture of the cortex - basal ganglia system is highly parallel suggesting a common principle in information processing. This principle is reflected in several parallel cognitive and motor loops in which the basal ganglia receive inputs from the cortex, and basal ganglia outputs through thalamus control cortical activity. In our work, we reconstruct parts of these loops in vitro by culturing young rat or mouse brains for up to several months. These neuronal co-cultures provide the most complex in vitro system that exists to date: a 6-layered cortical network that drives activity in a striatal network and also receives dopaminergic inputs from the substantia nigra. The system comprises of several hundred thousand of neurons and replicates network activity that strongly resembles that seen in vivo. Taking advantage of this approach, we are in the unique position to study single neuron electrophysiology, synaptic transmission between neurons, and neuronal populations within and across nuclei under in vivo-like conditions. This year's research focused on two aspects of information processing in the cortex-basal ganglia system. 1. What are the spatio-temporal characteristics of neuronal activity in cortical networks? The striatum is the main entry point for the cortex to the basal ganglia. Understanding striatal processing therefore requires understanding of cortical inputs to the striatum. For this reason, one of our projects focuses on the dynamics of neuronal activity in cortical networks. Cortical networks in isolation are characterized by brief periods of activity separated by many seconds of silence. We previously demonstrated that during these brief periods of neuronal activity, striatal neurons transition into an up-state, a hall mark of striatal processing of cortical inputs. For many decades, the statistics that underlies this type of cortical activity has been difficult to understand. We now show that this cortical activity can be explained in the framework of self-organized criticality developed in the physical sciences to describe avalanche dynamics. We could demonstrate that cortical networks self-organize into a critical state at which propagation of information is optimal. We further demonstrate that the underlying cortical architecture necessary for this type of activity is also present in acute, cortical slices and thus bears relevance for the brain in vivo. This newly discovered activity is very different from more commonly known cortical activity such as oscillation, synchrony, or waves. We named this new type of activity neuronal avalanches? This work provides a break through in our understanding of cortical circuits at the network level. 2. What is the role of GABAergic transmission in the striatum for processing of cortical inputs? The striatum is the first stage in basal ganglia circuits, which processes cortical inputs. More than 98% of striatal neurons use the inhibitory neurotransmitter GABA. Therefore, understanding GABAergic transmission in the striatum is crucial for our understanding of basal ganglia function. We recently demonstrated that striatal neurons control firing between local neighbors through a fast GABAergic synaptic transmission. Because an imbalance of striatal GABAergic activity is at the core of many basal ganglia diseases, the demonstration of this synaptic connection has widespread implications on striatal function and dysfunction. It was not clear, however, whether striatal GABAergic circuits participate in the up-state dynamics of the striatum. We demonstrated that GABAergic transmission between striatal neurons contributes substantially to the up-state in striatal neurons, which suggests that this neurotransmitter plays a pivotal role in striatal processing of cortical inputs.